Formation Flashcards
What is needed to form a contract?
Offer + Acceptance + Consideration
What is required for an offer to be valid?
There must be intent to enter into a contract + specific terms (like price, quantity, and identity of the parties). And, it must be communicated to the offeree.
What are the four ways to terminate an offer?
(1) Lapse of Time: an offer lapses after a reasonable time.
(2) Rejection: (including counteroffer, which is a rejection and a new offer)
(3) Revocation of an offer: An offer can be revoked before acceptance unless it falls into one of the (FOUR) categories.
(4) Death or incapacity of offeror
What are the four exceptions to revoking an offer before acceptance?
(1) Firm Offer by a merchant in a signed writing under the UCC. This offer can be held open for a maximum of three months.
(2) Option Contract: a promise to hold open the offer plus consideration for that promise.
(3) Unilateral Contract: if the offeree begins performance on a unilateral contract, the offer is held open for a reasonable time.
(4) Reasonably foreseeable substantial reliance on the offer.
How are bilateral contracts accepted?
By a promise to perform or beginning performance.
How are unilateral contracts accepted?
Can only be accepted by full performance.
How is an Article 2 contract accepted?
An offer for the sale of goods is accepted by promising to ship or shipping the goods.
When is acceptance effective?
Acceptance is effective when sent (mailbox rule).
Two Exceptions: First, in an OPTION contract acceptance is effective upon receipt. Second, if a REJECTION then an ACCEPTANCE is mailed, the one received first controls.
Under the common law, the acceptance must be the “______ _____” of the offer.
Mirror image
How is acceptance under the UCC different than acceptance under common law?
o Under the UCC, acceptance does not have to mirror the offer. Additional terms in an acceptance constitutes an acceptance.
Between merchants, an additional term will be a part of the contract unless
- –(i) it materially alters it,
- –(ii) the offeror objects within a reasonable time, or
- –(iii) the offer limits acceptance to the terms of the offer.
Under the majority rule, a different term is knocked out and replaced with gap fillers.
What is required to modify a contract under the common law?
Consideration is needed to modify a contract. Note: the performance of a preexisting legal duty is NOT consideration unless it falls into an exception.
What is needed to modify a contract under the UCC?
Only good faith is needed to modify a contract.
What is anticipatory repudiation? Can a repudiation be revoked? How?
- Anticipatory repudiation occur when a promisor party indicates to the other party its unequivocal inability or refusal to perform the contract prior to the date of performance.
- Under the common law, the repudiating party can revoke its repudiation any time prior to the date of performance unless one of the following occurs by the other party:
- –(i) the nonbreaching party accepts the repudiation,
- –(ii) the nonbreaching party relies on the repudiation, or —–(iii) the nonbreaching party files suit against the repudiating party.
What options are available after repudiation for the non breaching party if the repudiation is NOT retracted?
The nonbreaching party can do any of the following:
- –(i) accept the repudiation and terminate the contract,
- –(ii) treat the repudiation as a breach of contract and sue the breaching party,
- –(iii) suspend his performance and demand performance by the breaching party, or (iv) wait for the date of performance to occur and then file breach of contract suit.
Explain prospective inability to perform and what happens
It is when a party has reasonable grounds for insecurity that the other will not perform. The insecure party can demand adequate assurances that performance will take place.
